Shortened telomeres are a normal consequence of cell division. However, telomere shortening past a critical point results in cellular senescence and death. To determine the effect of telomere shortening on lung, four generations of B6.Cg-Terc^tm1Rdp mice, null for the terc component of telomerase, the holoenzyme that maintains telomeres, were bred and analyzed. Generational inbreeding of terc-/- mice caused sequential shortening of telomeres. Lung histology from the generation with the shortest telomeres (terc-/- F4) showed alveolar wall thinning and increased alveolar size. Morphometric analysis confirmed a significant increase in mean linear intercept (MLI). terc-/- F4 lung showed normal elastin deposition but had significantly decreased collagen content. Both airway and alveolar epithelial type 1 (AEC1) cells appeared normal by immunohistochemistry and the percentage of alveolar epithelial type 2 cells (AEC2) per total cell number was similar to wild type. However, due to a decrease in distal lung cellularity, the absolute number of AEC2 in terc-/- F4 lung was significantly reduced. In contrast to wild type, terc-/- F4 distal lung epithelium from normoxia-maintained mice exhibited DNA damage by TdT-dUTP nick end labeling (TUNEL) and 8-oxoguanine immunohistochemistry. Western blotting of freshly isolated AEC2 lysates for stress signaling kinases confirmed that the stress-activated protein kinase/c-Jun N-terminal kinase (SAPK/JNK) stress response pathway is stimulated in telomerase null AEC2 even under normoxic conditions. Expression of downstream apoptotic/stress markers, including Caspase-3, Caspase-6, Bax and HSP-25, was also observed in telomerase null, but not wild type, AEC2. TUNEL analysis of freshly isolated normoxic AEC2 showed that DNA strand breaks, essentially absent in wild type cells, increased with each successive terc-/- generation and correlated strongly with telomere length (R² = 0.9631). Thus, lung alveolar integrity, particularly in the distal epithelial compartment, depends on proper telomere maintenance.